Negative impact of being landlocked on trade: An empirical analysis of sub-Saharan Africa

In this paper, we examine the effect of being landlocked on trade, for the group of 15 landlocked countries in Sub-Saharan Africa across a 20 year period (1993-2012). The impact of being landlocked is estimated for a panel database using a standard gravity framework with additional variables including the efficiency of customs procedures, levels of domestic and surrounding infrastructure and dummy variables for international treaties. We find transport costs (measured using bilateral distance) have a substantial negative influence on trade, resulting from the requirement to carry goods overland which come at an increased cost . Contrary to the typical negative impact of geographical disadvantage, the findings suggest the effect of being landlocked actually enhances trade flows in the region, due to the majority of landlocked to landlocked trade being conducted with adjacent neighbours. Mitigating factors restricting trade in Sub-Saharan Africa include higher transport costs due to the seriously flawed and impaired levels of domestic infrastructure, furthermore these costs become exacerbated by the equally poor levels of surrounding nations’ infrastructure facilitating trade. Trade is however improved through having efficient customs procedures, which is essential for landlocked nations wishing to use neighbours as transit corridors. Weak procedures lead to increased import/export times which subsequently have effects that are equivalent to high tariff barriers. We find that colonial history such as war between nations, negatively affects customs procedures, further restricting trade. At the same time we also observe the significant positive effect brought about by the implementation of international multilateral treaties in alleviating the geographical disadvantage of being landlocked.

Keywords: landlocked, transport costs, infrastructure, customs, Sub-Saharan Africa.

JEL Classification: F10, F14, N77